What is the significance of common knowledge in game theory and how does it impact decision-making in strategic interactions?

Common knowledge in game theory refers to information that is known by all players and is known to be known by all players, and so on. It is significant because it helps players make more informed decisions in strategic interactions. When all players have the same information, they can better predict each other's actions and outcomes, leading to more strategic and rational decision-making. This can ultimately lead to more successful outcomes in games and negotiations.